Vodafone is carrying out its restructuring at a forced march. A month after presenting a vast social plan involving 11,000 job cuts, or 12% of its workforce, the telecom operator announces a wedding with great fanfare. It intends to merge its British activities with Three, another operator operating in the United Kingdom and belonging to the Hong Kong conglomerate CK Hutchison.
This merger would create the largest mobile network across the Channel, with around 27 million customers. The new group would exceed, according to the counts of the BBC, Virgin Media O2, owned by the Spanish Telefónica and the American Liberty Global and at the head of around 24 million subscribers, and EE, an operator belonging to BT (ex British Telecom) and its approximately 20 million users.
After eight months of negotiations, the third and fourth English operators would thus become number one with 39% of the market share. Vodafone would control the new entity, valued at more than 19 billion euros, by monopolizing 51% of the capital while CK Hutchison would hold the remaining stake. The second largest operator in the world would thus strengthen its domestic market, which is growing, while it is struggling in these regions other than Germany, Spain and Italy.
The two newlyweds announced that they would invest 11 billion pounds sterling (12.86 billion euros) over the next ten years to deploy ” one of the most advanced standalone 5G networks in Europe “. By this time, more than 99% of the British population should be covered by the common network.
Under the threat of a blockage from the competition authority
From day one of the merger, Vodafone and Three subscribers will benefit from a better network experience with increased coverage and reliability at no additional cost “, promise the two operators in a joint press release. Better, the merger will contribute up to 5 billion pounds to the country’s economy, create jobs and support the digital transformation of English companies.
This mechanic must however be approved by the CMA, the British competition and markets authority. What is not earned. The regulator recently blocked Microsoft’s takeover of video game studio Activision Blizzard for $69 billion.
In 2016, the CMA asked the European Commission to ban Three’s takeover of O2, arguing it would risk driving up prices. The specter of soaring subscription prices should once again be raised with the prospect of going from four to three mobile operators. Fears for employment are also put forward while the two companies expect, at cruising speed, a cost reduction of 700 million pounds per year.
The consolidation movement relaunched in Europe?
If successful, this merger could lead to consolidation in Europe. The big maneuvers have already begun in Spain. Last summer, Orange and MasMovil announced their desire to combine their activities in a joint venture, controlled 50-50.
By the end of the month, the board of directors of Telecom Italia (TIM), an operator 23.75% owned by the French group Vivendi, will study the offers from the Italian Caisse des dépôts (CDP) and the American investment KKR.
The French Iliad could be a player in this consolidation movement. Free’s parent company intends to become one of the top three European operators, if necessary through external growth operations. After having acquired the Polish cable operator UPC Polska for 1.5 billion euros, it could set its sights on other markets. In early 2022, Iliad attempted to acquire 100% of Vodafone Italia.